A Panasonic TV displays a Home Energy Management system in a PanaHome house in the Japanese “smart town” of Fujisawa © Bloomberg
Panasonic has made a landmark concession to activist investors in a battle seen as a pivotal test of Japan’s commitment to better corporate governance under prime minister Shinzo Abe.
The decision by the electronics manufacturer to raise its offer for the 46 per cent it does not already own of its listed housebuilding subsidiary, PanaHome, follows a dispute with minority investors that has raged since January and could now trigger further rounds of bidding.
Shares in PanaHome surged 19 per cent during Monday’s trading session in Tokyo, closing more than 2 per cent higher than Panasonic’s revised bid of Y1,200 ($10.90) per share. In a further concession to the activists, Panasonic’s new offer was all-cash, where it had previously been offering shares and represented a 16.4 per cent premium on Friday’s closing price.
Oasis Management, the Hong Kong-based fund that holds a 9.13 per cent stake in PanaHome and has effectively led the shareholder revolt, has consistently argued that Panasonic’s original offer represented an unacceptably “cheap price” and that it undervalued the housebuilder by more than 50 per cent.
Tokyo’s many listed subsidiaries of major corporations are viewed as prime breeding grounds for poor corporate governance and persistent failure to look out for the interests of minority shareholders.
The breakthrough represented what corporate governance experts said was a “welcome ray of light”, as momentum behind the reformist agenda of the Abenomics economic revival programme visibly fades. Nearly two years since the introduction of Japan’s first corporate governance code, early optimism has been dented by scandals at Japanese giants such as Toshiba, Fujifilm and Dentsu.
When net cash was stripped out, Panasonic’s initial offer in December represented a valuation of Y339 per share, for a forward price/earnings ratio of just 5.6 times, according to Credit Suisse analysts. Minority investors believe a valuation between Y1,500 and Y1,950 is closer to reality.
Panasonic stressed that its decision to switch to an all-cash tender offer from a share swap was not a direct result of criticism from minority shareholders. It attributed the change to a revision in Japanese taxation regulations that made it easier to carry out all-cash offers.
Jefferies analyst Zuhair Khan said that Panasonic’s move would allow it to claim it had taken minority shareholders’ interests and opinions into consideration should the matter end up in court. He added: “It leaves Panasonic the option to further change their bid after reviewing the results of the tender offer.”
Panasonic said it believed the added premium would lead to approval of the new offer.
“There may have been taxation issues but it is true that there were several shareholders who had criticised the original offer as too low,” said Masahiro Mochizuki, analyst at Credit Suisse. “It would have been better if Panasonic had done this from the beginning, but it is still a good step forward and there is increased transparency (over the deal).”